DANVILLE BEN. & BLDG. ASS'N et al. v. HUFF et al. In re PORTERFIELD, 262 F. 403

EVANS, Circuit Judge (after stating the facts as above). The District Judge in disposing of this issue of priority relied entirely upon the earlier decree of sale, saying: “* * * Said decree establishing the validity of said liens of S. E. Huff necessarily implied that the said S. E.

Huff had filed his claims for lien within the time required by the state statute, for otherwise said claims would not have been valid liens as against the trustee of said bankrupt representing said judgment creditors, and that therefore the effect of said decree is to foreclose the question as to the validity of said mechanics’ liens, and the court adheres to its announcement to counsel at the trial of this cause, that the only question for consideration herein on distribution, as to the liens of S. E.

Huff is as to the time that said liens attached as compared to the time of the execution and delivery of the mortgages on said tracts Nos. 1. and 3 above described. * * * ” All evidence tending to show the claim for liens was insufficient or not filed in time was excluded. Appellee offered no evidence to show the date when the last material was delivered, while appellant’s offer to prove such date was more than four months prior to December 9, 1916, was rejected.

The court also excluded appellant’s testimony tending to show both lien claims were insufficient as against valid mortgages, in that they failed to set forth “a sufficiently correct description of the lots or tracts of land to identify the same.” We think the District Court misconceived the scope of the reservation appearing in the prior decree. The decree of sale did not determine in any way the issue of priority between mortgagee and the lienholder. As against appellant the court could not have determined this issue in appellee’s favor.

While appellant, upon its default, was bound by any decree that was supported by allegations in the bill as filed, it was not subject to a decree based upon allegations in appellee’s answer and not appearing in the bill. Had the latter party wished to litigate this question of priority with his codefendant in that suit a cross-bill tendering such an issue should have been served upon appellant. That this was the view of the late Judge Humphrey in entering the decree of the sale is, we think, apparent from the language used.

The court left open for later determination all of those issues of fact that bore upon this question. In reaching this conclusion we have not overlooked appellee’s argument that the decree of sale recognized the validity of the lien and that such recognition was necessarily an adjudication that the claims were seasonably filed and that each contained a sufficient description of the real estate. The Illinois statute (Hurd’s R.

S. 1917, c. 82, §§ 15, 21) however, does not support the conclusion that an adjudication of validity necessarily implies adjudication by the court that the claims were sufficient in form and were timely filed. Had Huff failed to file his claim within four months from, the date of the delivery of the last

article that went into the improvement, his lien would have been lost as against the mortgagee, but it .still would have been good as against the bankrupt. Schmidt v. Anderson, 253 Ill. 29, 97 N. E. 291.

Grant that the decree upholding the validity of the lien necessarily involved and disposed of the question arising out of the misdescription as well as the date of the delivery of the last article, so far as the trustee in bankruptcy is concerned, still these issues were open to appellant, not only because the court especially reserved them in its decree, but because the court was without authority, on the pleadings as they existed at the time of the decree, to conclude these questions against the appellant.

The decree is reversed, with directions to take testimony upon the issues of fact which are determinative of the issue of priority between appellant and the appellee, Huff.